Cablegate: Lloyd Secures Insurance Extension

VZCZCXYZ0030
RR RUEHWEB

DE RUEHLP #1629 1671927
ZNR UUUUU ZZH
R 161927Z JUN 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC 9598
INFO RUEHAC/AMEMBASSY ASUNCION 5917
RUEHBO/AMEMBASSY BOGOTA 3234
RUEHBR/AMEMBASSY BRASILIA 7081
RUEHBU/AMEMBASSY BUENOS AIRES 4334
RUEHCV/AMEMBASSY CARACAS 1625
RUEHPE/AMEMBASSY LIMA 1618
RUEHME/AMEMBASSY MEXICO 1723
RUEHMN/AMEMBASSY MONTEVIDEO 3843
RUEHQT/AMEMBASSY QUITO 4259
RUEHSG/AMEMBASSY SANTIAGO 8807
RUEANHA/FAA NATIONAL HQ WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS LA PAZ 001629

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/TRA JHORWITZ AND EB/TRA/OTP BMATTINGLEY
STATE ALSO FOR WHA/AND LPETRONI
STATE PASS TO FAA FOR CCAPESTANY
STATE PASS TO DOT FOR CCOLDREN
COMMERCE FOR JANGLIN

E.O. 12958: N/A
TAGS: EAIR ECON PGOV BL
SUBJECT: LLOYD SECURES INSURANCE EXTENSION

REF: LA PAZ 1518 (AND PREVIOUS)

1. (SBU) Summary: Bolivia's national airline, Lloyd Aereo
Boliviano, narrowly avoided collapse June 15 by securing a
new extension on its aircraft insurance, set to expire the
same day. The extension will allow the carrier to continue
operating, but with board members' June 15 decision to resign
en masse and control now in the hands of a workers'
committee, operations will likely be sporadic at best. Four
prefects' recent offer to invest $20 million to save the
airline may yield few results, and with only three aircraft,
numerous flight cancellations, and deepening financial
difficulties, bankruptcy may remain the most probable outcome
(reftel). End summary.

2. (SBU) Bolivia's national airline, Lloyd Aereo Boliviano,
narrowly avoided collapse June 15 by securing a new extension
on its aircraft insurance, set to expire the same day.
According to William Scarborough, Cochabamba Consular Agent
and president of Lloyd's audit committee, the carrier paid
part of its estimated $600,000 debt to its insurance company
and promised to pay the remainder over the next several
weeks. The extension will allow the carrier to continue
operating, but with board members' June 15 decision to resign
en masse and control now in the hands of a workers'
committee, operations will likely be sporadic at best.

3. (SBU) Earlier this week, Cochabamba Prefect Manfred Reyes
Villa, along with his counterparts in Beni, Pando, and
Tarija, reportedly offered to invest $20 million to save the
airline. The four governors have not released the details of
their proposed plan, but according to Scarborough,
negotiations with Lloyd executives may be underway.
Concluding them, however, may be difficult, as Lloyd's chief
executive, Ernesto Asbun, is reportedly in hiding, unwilling
to reveal his whereabouts for fear of physical reprisal from
airline employees blaming him for Lloyd's problems.

4. (SBU) Comment: The prefects' offer may yield few results,
and with only three aircraft, numerous flight cancellations,
and deepening financial difficulties, bankruptcy may remain
the most probable outcome (reftel). Lloyd has stumbled along
since the February pilots' strike that initiated the crisis,
but it can continue only so long. Its situation is
increasingly desperate, debts continue to mount, and a viable
solution is far from evident. End comment.
GREENLEE

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